TPP, even without the United States, could create a new regional trade strategy

Barron’s author Craig Mellow offers an extremely interesting analysis of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which was launched by 11 nations from Japan to Chile on Jan. 23. Among his observations is the fact that despite the economic size of the area is considerably smaller without the United States, five more Asian nations, led by Taiwan and South Korea, may join over the next five years or so, make up for Washington’s withdrawal on the aggregate.

Moreover, Mellow observes that new production processes could develop that run independently of both China and the United States:

Perhaps CPTPP’s most important impact is the psychological shift it represents in Japan and the other industrial powers knocking on the door, Korea and Taiwan. They are further opening to trade while the U.S. retreats, and uniting to form a third economic force between Washington and Beijing. “Somehow these societies as a whole have decided it makes sense to become more efficient,” Petri says. “Combining Japan and Korea’s technology with Vietnam and Malaysia’s cheap labor could lead to new value chains that compete with the U.S. and China.” Stay tuned.

This is a neat insight. Ultimately, it suggests that the US withdrawal from the TPP won’t necessarily give China a free hand in the region. Instead, the remaining countries could conceivably begin to congeal to form their own economic policy space independent of China. It’s in my view an uphill battle given the sheer heterogeneity of the countries in the new bloc, but it’s certainly not impossible.